BP banned by US from govt contracts after oil spill deal, says it lacks of 'business integrity'

SummaryThe US govt banned BP Plc on Wednesday from new federal contracts over its "lack of business integrity".

The U.S. government banned BP Plc on Wednesday from new federal contracts over its "lack of business integrity" in the 2010 Deepwater Horizon oil spill, possibly imperiling the company's role as a top U.S.

offshore oil and gas producer and the No. 1 military fuel supplier.

The suspension, announced by the Environmental Protection Agency, comes on the heels of BP's Nov. 15 agreement with the U.S. government to plead guilty to criminal misconduct in the Gulf of Mexico disaster, the worst offshore oil spill in U.S.

history. The British energy giant agreed to pay $4.5 billion in penalties, including a record $1.256 billion criminal fine.

BP and its affiliates are barred from new federal contracts until they demonstrate they can meet federal business standards, the EPA said. The suspension is "standard practice" and BP's existing U.S. government contracts are not affected, it said.

The EPA acted hours before a government auction of offshore tracts in the Gulf of Mexico, a region where BP is is the largest investor and lease-holder of deep-water tracts and hopes for further growth. BP is also the top fuel supplier to the U.S. military, the largest single buyer of oil in the world.

Suspension of contracts could give the government leverage to pressure BP to settle federal and state civil litigation that could top $20 billion if a court finds BP was grossly negligent in the Deepwater Horizon disaster.

An EPA official said government-wide suspensions generally do not exceed 18 months, but can continue longer if there are ongoing legal cases.

In a statement, BP said it has been in "regular dialogue" with the EPA, and that the agency has informed BP that it is preparing an agreement that "would effectively resolve and lift this temporary suspension." The EPA has notified BP that the draft agreement will be available soon, BP said.

U.S. operations accounted for more than 30 percent of BP's pre-tax profits in the third quarter, and the United States accounts for about a fifth of BP's global oil production.

The U.S. military has been a reliable customer of BP's jet fuel and other refined products. As recently as September, BP affiliates won two military fuel contracts worth as much as $1.37 billion, according to a website that tracks U.S. Military contracts.

The EPA's action is a sign that all federal contractors will be held to high standards, said Scott Amey, general counsel for the Project on Government Oversight, a private watchdog group.